USD/CAD Sentiment Hits Extremes Ahead of CPI- 1.2965 Critical Support
- USDCAD at key support at 1.2965/82 ahead of Canadian CPI
- Release to threaten immediate short-bias
- Updated targets & invalidation levels
Chart Created Using FXCM Marketscope 2.0
Technical Outlook: USDCAD is testing a critical support confluence at 1.2968/81 – this level is defined by the 61.8% retracement of the advance off the May low, the 100% extension of the decline off the 2016 high, a median-line parallel extending off the January 29th high and an embedded channel support extending off the February 4th low. Although we’re likely to see some recovery off this mark, it’s important to keep in mind the broader outlook remains weighted to the downside on account of an objective break of the weekly opening-range lows.
That said, the immediate short-bias is at risk while above this support level heading into Canada’s inflation report tomorrow. Should the core consumer price index highlight sticky price growth, look for continued CAD strength (USDCAD weakness) with a break below support targeting subsequent objectives at 1.2899, the October low-day close at 1.2861 & 1.2831.
Look for a weaker than expected read to offer a reprieve for the greenback with such a scenario eyeing initial topside resistance objectives at 1.3039, the 1.31-handle, last week’s low at 1.3171 & the weekly open at 1.3218. Note that a breach above key resistance at the September high-day close / 61.8% retracement at 1.3420/61 is needed to shift the broader focus back to the topside for the pair. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount!
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- The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long USD/CAD since February 25th with the reading hitting fresh extremes this week as it crossed above the +1.50 mark.
- Even as USD/CAD comes up against near-term support, the ratio has advanced to +1.82 as long positions jumped 11.1% from the previous week, while short positions narrowed 15.9% during the same period.
Why and how do we use the SSI in trading? View our video and download the free indicator here
Relevant Data Releases This Week
Other Setups in Play:
- GBP/JPY Bullish Above 159.40- Break of 164.85 to Mark Behavior Change
- AUD/USD Post-FOMC Rally at Risk Ahead of Australian Labor Report
- USDOLLAR Index Levels that Matter Heading into FOMC
- GBP/USD on the Defensive Ahead of UK Employment / Budget Statement
- AUD/USD Pullback Targets Near-term Support Ahead of FOMC, Aussie Jobs
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---Written by Michael Boutros, Currency Strategist with DailyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.